Balancing Act

How can Toyota sell more trucks and SUVs yet also reduce its carbon footprint? One word: hybrids.

April 23, 2019

A Glimpse of the Future -- Team members greet the Project Portal 2.0 Beta commercial test truck, powered by Toyota's hydrogen fuel cell system. It made a stop at TMNA headquarters in September on its way to the Toyota Arizona Proving Grounds.

Does fuel economy still move the needle when it comes to vehicle sales? If not, where does that leave Toyota, which has long built its competitive advantage on products like hybrids that deliver class-leading mpg?

Even bigger picture: During this era of relatively low gasoline prices, how does the company balance customer demand for trucks and SUVs against the existential threat of climate change?

And how does uncertainty over fuel economy standards, with the federal government seemingly intent on going in one direction while states like California go in another, factor into all of this?

Recently, we put these thorny questions to Doug Murtha. He’s TMNA’s group vice president of Corporate Strategy and Planning, so it’s his job to keep an eye on the horizon and think big thoughts.

Not surprisingly, he had some very interesting answers for us. And a vision for our future.

Committed to Cutting Carbon

“It starts with the Toyota Environmental Challenge 2050,” says Murtha, referring to the promises Toyota made in 2015 to drastically reduce its carbon footprint (among other goals) within the next 30 years. “Most companies would treat something like that as a vision or public relations piece. But it really is our long-term plan. We have internal milestones for our vehicles and our factories to get there. And while the challenge is global in scope, North America is a big chunk of the production and sales volume. So we need to do our part.”

Murtha says meeting the challenge will hinge on the automotive industry’s transition from petroleum to electrification, including a dominant role for hydrogen as a vehicle fuel source. That’s why Toyota continues to invest in hydrogen fuel cell technology, even if the implementation of a hydrogen refueling infrastructure in the U.S. is off to a slow start. Fortunately, the company has the resources and the vision to play the long game.

Spirited Performance -- Contrary to popular belief, the 2019 RAV4 Hybrid is the quickest version of the hot-selling compact crossover.

Medium Term: Hyped-up Hybrids

But there are more immediate steps Toyota can and must take to get from where we are to where we need to be. The recent announcement that, by 2025, every vehicle in the lineup will have an electrified option (hybrid, plug-in hybrid, battery electric or fuel cell) is a clue.

That really does mean every vehicle. Like, say, an electrified Tundra. Hmmm…

Murtha understands that, for many traditional truck customers, that’s going to be a tough sell. So the mission will be to change perceptions about the strengths and weakness of hybrids and other electrified powertrains, perhaps even coming up with a new marketing vocabulary for the technology.

“Think about Tesla, in particular the Model S,” says Murtha. “Most people don’t buy it because it’s a zero-emission vehicle. They buy it because it has a 0-to-60 mph time of under six seconds. Hybrids have a similar story to tell, especially with each new iteration of our system. And it’s not just about acceleration. The linear feel between throttle input and G force has also greatly improved over the years. I’d expect future generations to push this performance envelope even further.”

Case in point: The all-new 2019 RAV4 Hybrid is the quickest model in the compact crossover’s lineup. Yet it’s still pretty darn fuel frugal, with a combined EPA estimate of 40 mpg. This technology has come a long way since the rise of the iconic Prius.

In other words, if gasoline prices hold steady and fuel economy fails to drive sales, then the performance aspects of hybrids could be the difference maker — if Toyota chooses to dial them up that way. Murtha emphasizes that they’d still deliver an mpg boost. But rather than, say, a 30 percent gain vs. a non-hybrid he says it might be more like 20 percent along with more spirited driving characteristics.

This balancing act would vary by vehicle. So, while Corolla and Sienna hybrids might lean on the side of fuel efficiency, hybrid-powered versions of 86 and Supra would pump up performance. It’s not as crazy as it sounds. After all, F1 race cars are now propelled by turbo hybrids.

Also important: Toyota has laid the groundwork, both internally and with its suppliers, to meet this anticipated demand for more hybrids. In the past, it couldn’t add a hybrid option on one model without negatively affecting the availability on another.

Zero Emissions -- Unless you count water vapor, that is. In the long run, Toyota envisions a hydrogen society where vehicles like the Mirai are commonplace.

Long Term: A Portfolio Approach

While hybrids help bridge the gap from low-cost oil to a low- or no-carbon future, Toyota will continue to embrace a portfolio approach to alternative fuel vehicles. That means the company will eventually become a bigger player in the battery-electric segment. And it will seek opportunities to expand fuel cell applications, such as the Project Portal commercial truck program.

Change is inevitable.

“It’s one thing to predict the future. It’s quite another to have a road map that will get you there,” says Murtha. “It’s not going to be easy. And, given that we’re talking about the next 30 years, there will be surprises. But Toyota is well positioned to make this journey.”

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